The decision to scrap Canada’s fair wage policy was based on lobbying rather than scientific inquiry.

Josh Mandryk says fair wage policies are necessary in the construction industry because of the sector's unique features, including fierce price competition, the transient nature of the workforce, the pervasiveness of subcontracting and the likelihood of permanent layoffs. (Nov.15, 2011)

By:Josh Mandryk Published on Tue Jul 03 2012

The Fair Wages and Hours of Labour Act was repealed by a single line in the 425-page federal omnibus budget bill. The act mandated minimum wages contractors had to pay their workers on federal government construction contracts, calculated based on the prevailing wages in the geographic region.

The move was discovered by NDP MP Pat Martin just weeks before the budget passed. Prior to that, the government had made no mention of its decision.

In response to criticisms, Federal Labour Minister Lisa Raitt dismissed the legislation as “unnecessary red tape for employers,” which was “really a matter of provincial jurisdiction.” At the same time, she maintained that scraping the act would not impact construction wages.

Except for her claim that scrapping the act won’t deflate wages, Raitt’s position is lockstep with that of Merit Canada, the anti-union contractors’ association that’s been lobbying against the act. In an open letter to Raitt last fall, Merit Canada criticized the legislation for resulting in workers receiving wages that “often exceed the rates that would be payable in the absence of such policies.”

The last major changes to the act occurred in 1997 when the government announced its intention to resume the practice of updating the schedule of wage rates, which had been cancelled in 1984. In response to concerns raised by some segments of the industry at the time, including the Merit Contractors Association of Alberta, the government appointed Douglas Stanley to review the operation of the act and its regulations.

The review culminated in the Stanley Report, which found that construction workers were particularly vulnerable to exploitation and that the purpose of the fair wage policy was still relevant. The report recommended that the federal government maintain its fair wage policy and update its wage schedules.

In contrast to this process, the decision to scrap the act was made without any formal review. Instead, it appears to have been based solely on Merit Canada’s lobbying. Records from the Office of the Commissioner of Lobbying indicate that Merit Canada was lobbying Raitt on the Fair Wages Act as early as February 2011. Just days after the decision to scrap the act was made public, Merit Canada boasted of its “remarkable success” in lobbying federal Conservative politicians since opening its national office last year.

Repealing the Fair Wages and Hours of Labour Act is but one part of an increasingly clear pattern of wage suppression that includes delaying retirement benefits to 67, clawing back employment insurance, ramping up the temporary foreign worker program and loosening the standards so that foreign workers can be paid 15 per cent less than their Canadian counterparts.

These policies will ensure an ample supply of workers willing to accept whatever low-paying jobs they can find.

In their attempts to defend the government’s decision to scrap the act, some commentators have suggested that fair wage policies unfairly favour construction workers.

This view fails to appreciate the distinct nature of the construction industry. As the Ontario Construction Secretariat (OCS) explained in a 2006 report entitled Impact of Fair Wage Policies on the Construction Industry: “The fact that construction is different is a basic principle of labour legislation in every jurisdiction in Canada. The construction industry requires distinct policies.” It is based on this principle that a third of the Ontario Labour Relations Act is specific to construction.

Fair wage policies are necessary because of construction’s vulnerability to destructive forms of competition. The transient nature of its workforce, fierce price competition, the pervasiveness of subcontracting and the substantial likelihood of permanent layoffs are among the factors that make construction employment unique. The practice of awarding public sector contracts to the lowest bidder exacerbates the risk of falling into destructive competition. Fair wage policies are a necessary counterbalance to this tendency. By taking wages out of the equation, they allow for positive competition between firms, promoting increased productivity without sacrificing employment standards.

But fair wage policies are about more than just pay.

Fair wage policies help promote workplace safety. American studies cited by the OCS have found repealing fair wage policies to be associated with an increase in reported lost-time injuries, and that states without fair wage policies have higher incidence of workplace injuries in construction. One study saw a 13.8 per cent increase in lost-time injuries after the repeal of fair wage policies. A subsequent study found that states without fair wage policies had reported lost-time injuries in construction 25.5 per cent higher than those with such protections.

Fair wage policies are also positively correlated with the uptake of apprenticeships and training. Studies from the U.S. have found the repeal of fair wage acts to be strongly associated with a decline of apprenticeships in the construction trades. In Canada, building trade unions and their employer partners are the largest private trainers in the country. Each year, they spend a quarter of a billion dollars on training, second only to the government. To the extent that repealing fair wage policies reduces union competitiveness, this is likely to have a negative impact on apprenticeships.

Independent studies have repeatedly demonstrated the importance of fair wage policies. They are strongly correlated with increased workplace safety and apprenticeship uptake, and they ensure workers are treated with fairness and dignity. Unfortunately, the decision to scrap Canada’s fair wage policy was based on lobbying rather than scientific inquiry, putting the narrow interests of Merit Canada above the hundreds of thousands of workers employed in construction. Even worse, this decision will be cited when provincial and municipal governments are pressured to follow suit. This will not only hurt workers, but the long-term prosperity of the industry as a whole.

Josh Mandryk is a law student for the International Union of Operating Engineers, Local 793.

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